Daito Trust Construction Co., Ltd. · If the candidate of this proposal is elected as originally...

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Securities code: 1878 June 1, 2018

To Our Shareholders

Naomi Kumakiri President and Representative Director, Chief Executive Officer Daito Trust Construction Co., Ltd. 16-1, Konan 2-chome, Minato-ku, Tokyo

Notice of Convocation of the 44th Ordinary General Meeting of Shareholders

You are cordially invited to attend the 44th Ordinary General Meeting of Shareholders of the Company. The meeting will be held as described below.

If you are unable to attend the meeting, you may exercise your voting rights via postal mail or the Internet. Please review the attached Reference Documents for the General Meeting of Shareholders and exercise your voting rights by 5:00 p.m. on June 25, 2018 (Monday).

1. Date and Time: June 26, 2018 (Tuesday) 10:00 a.m.

2. Place: 16-1, Konan 2-chome, Minato-ku, Tokyo Shinagawa East One Tower 21F, Main Conference Room

3. Agenda for the Meeting Matters to be reported: 1. The Business Report, the Consolidated Financial Statements and the audit results of the

Consolidated Financial Statements by the Accounting Auditor and the Audit & Supervisory Board for the 44th Fiscal Term (April 1, 2017 to March 31, 2018)

2. The Non-consolidated Financial Statements for the 44th Fiscal Term (April 1, 2017 to March 31, 2018)

Matters to be resolved: Proposal No. 1: Appropriation of Surplus for the 44th Fiscal Term Proposal No. 2: Partial Amendment to the Articles of Incorporation Proposal No. 3: Election of One (1) Director

Notes: 1. For those attending, please present the enclosed Voting Rights Exercise Form to the receptionist on arriving at the meeting. You

are also requested to bring this document with you to the meeting for your reference. 2. If you vote by proxy, please make sure your proxy presents the Letter of Attorney along with the Voting Rights Exercise Form

to the receptionist. In addition, pursuant to the provisions of the Articles of Incorporation of the Company, only one (1) shareholder holding the voting right of the Company is entitled to exercise a proxy voting right on your behalf.

3. If there are any amendments to the Business Report, the Consolidated Financial Statements and the Non-consolidated Financial Statements, and the Reference Documents for the General Meeting of Shareholders, the revised version will be posted on our website (http://www.kentaku.co.jp/corporate/ir/kabunushi.html).

4. As part of our efforts to be environmentally friendly, the attending officers and the meeting staff of the Company will dress in a “cool biz” style (without jacket and tie). Please dress lightly upon attending the meeting.

5. Disclosure on the Company’s website of the documents to be included in this Notice of Convocation The following items are not included in the Reference Documents attached to this notice but are posted in our website

(http://www.kentaku.co.jp/corporate/ir/kabunushi.html) pursuant to the provisions of law and Article 16 of the Articles of Incorporation of the Company.

The Reference Documents attached to this notice are part of the information audited by the Accounting Auditor and Audit & Supervisory Board Members as part of their preparation of Accounting Auditor’s Report and Audit & Supervisory Board Report, respectively.

(1) Following matters in the Business Report: - Main business - Employees - Main place of business - Main creditors and borrowing amounts

This document has been translated from a part of the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

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- Other significant matters concerning shares - Matters concerning share options of the Company

(2) Consolidated Statement of Changes in Net Assets and Notes to Consolidated Financial Statements (3) Non-consolidated Statement of Changes in Net Assets and Notes to Non-consolidated Financial Statements

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Reference Documents for the General Meeting of Shareholders

Proposals and references:

Proposal No. 1: Appropriation of Surplus for the 44th Fiscal Term

Appropriation of surplus for the 44th Fiscal Term is reported as follows:

Year-End Dividend

The Company recognizes adequate profit return to shareholders as one of the most important management matters and practices it. For dividends, the Company, while taking the basic policy stance of providing stable dividends through ongoing reinforcement of our business foundation, aims to set the payout ratio at 50%, and includes a basic dividend of 100 yen and the profit return based on consolidated business performance. Based on these standards, the Company will set a dividend of 304 yen per share for the year-end dividend of the 44th Fiscal Term.

The annual dividend to be paid would be 583 yen per share (up 47 yen per share from the previous fiscal year) including the interim dividend of 279 yen per share paid in November last year.

(1) Type of dividend property

Cash (2) Matters regarding dividend property’s allocation to shareholders and total amount

Cash payment of dividend per share: 304 yen per common share of the Company Total amount: 22,893,025,824 yen

(3) Effective date of dividend payment

June 27, 2018

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Proposal No. 2: Partial Amendment to the Articles of Incorporation

1. Reasons for the Amendment

In order to enhance the added value of rental properties managed by the Daito Group and improve the convenience of tenants, a subsidiary of the Company that operates the LP gas supply business newly commenced the provision of city gas supply services to tenants. Accordingly, partial amendment and contents modification shall be made to the business purpose stipulated in Article 2 of the Articles of Incorporation.

2. Description of the Amendment

Description of amendment is as follows:

(Amended part is underlined.)

Existing Articles of Incorporation

Proposed Amendments Reason for change

(Purpose)

Article 2. The purpose of the Company shall be to operate the following businesses and to control and manage the business activities of relevant companies by owning shares or equity interests in companies engaged in the following businesses:

1-22. (Omitted)

23. Sales and purchases of petroleum, petroleum products, liquefied petroleum gas, and other high-pressure gases

24-41. (Omitted)

(Purpose)

Article 2. The purpose of the Company shall be to operate the following businesses and to control and manage the business activities of relevant companies by owning shares or equity interests in companies engaged in the following businesses:

1-22. (Unchanged)

23. Businesses related to the supply and sales of gas

24-41. (Unchanged)

A subsidiary of the Company, which operates the LP gas supply business, started the city gas supply business, because of which partial amendments and contents modification are made.

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Proposal No. 3: Election of One (1) Director

In order to achieve the sustainable growth of the Daito Group and improve corporate value in the medium- to long-term, in the construction business, which is the Company’s core business, the Company will need to strengthen its construction system and steadily secure net sales and profits of completed construction contracts with an eye to the future increase in the construction volume of the Daito Group, the increase in construction work related to the Tokyo Olympics and Paralympic Games and the manpower shortage in the construction industry. Therefore, the role of the construction divisions is important. Because a Director who was in charge of the construction divisions retired from the office of Director, due to the expiration of the term, at the close of the 43rd Ordinary General Meeting of Shareholders held on June 28, 2017, we need to appoint his successor to reinforce the management/supervision framework of the construction divisions. For this reason, the Company proposes that shareholders elect one (1) Director to be in charge of the construction business.

If the candidate of this proposal is elected as originally proposed, seven (7) of the sixteen (16) members of the Board of Directors will qualify as independent outside officers (three (3) Outside Directors and four (4) Outside Audit & Supervisory Board Members) who have satisfied the independence criteria established by the Company. Because independent outside officers account for 43.7% of the total attendees of the Board of Directors, it will enable discussions at the Board of Directors based on opinions expressed from an independent and neutral perspective.

The respective name, career summary, etc., of the candidate for Director is as follows.

Name Position and responsibilities in the Company

Fumiaki Nakagami Executive Officer and General Manager of Construction Management Department

New appointment

(Note) 1. There is no special interest between the candidate for Director and the Company.

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Candidate

for

Director

Fumiaki Nakagami

(Born July 28, 1959)

[Number of the Company shares held] 1,324 shares

New appointment

■ Career summary, position and responsibilities in the Company and significant concurrent positions held

October 1988 Joined the Company

April 2012 General Manager of Technological Development Department (in charge

of East Japan Region)

April 2014 General Manager of Technological Development Department

In charge of East Japan Region

April 2015 Executive Officer and General Manager of Safety and Quality Control

Department

April 2017 Executive Officer and General Manager of Construction Management

Department (current position)

<Reason for nomination as candidate for Director> Mr. Nakagami has long been involved in the construction divisions of the construction business, which is the core business of the Daito Group. While having engaged in efforts including the building of a construction system responding to the tight supply of construction workers and the increased work volume of the Daito Group, the reduction of work costs and ensuring safety at the construction sites and reforming of construction organizations and developing engineers to ensure technological capabilities and construction quality for the highest level in the industry, he has contributed to strengthening said divisions of the Group. The construction divisions that Mr. Nakagami has long been involved with are central to the Daito Group’s construction business, which is the core business of the Daito Group. He, therefore, has been nominated as a candidate for Director based on the judgment that he possesses extensive experience and knowledge on the construction divisions, and will be best suited to reinforce the management/supervision framework of the construction divisions of the Daito Group.

<Candidate’s message to shareholders> While the increasing demand for construction work related not only to disaster restoration from the Great East Japan Earthquake and the Kumamoto Earthquake, but also to the Tokyo Olympic Games and the decrease in the number of construction workers continues, in addition to intensifying competition in the rental housing market, it is an important issue for the Daito Group to enhance construction efficiency and quality through strengthening of the construction system and the reduction of work costs, as well as the development and promotion of new construction methods and technologies to ensure the future performance of the construction business. Under such circumstances, we will establish a construction system with an eye to the future increase in the construction volume of the Daito Group and the industry’s trend, with efforts to execute organizational reform and personnel development in the construction divisions in pursuit of construction efficiency and the highest level of technological capabilities in the industry. I will make efforts to contribute to the securement of corporate performance and sustainable growth and the enhancement of the corporate value of the Daito Group.

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(Appendix) Business Report (From April 1, 2017 to March 31, 2018) 1. Current State of Enterprise Group

(1) Business Progress and Results

(i) Overview of Business Environment

In the fiscal year ended March 31, 2018, improvement in corporate performance and employment situations continued and the Japanese economy recovered at a moderate pace. The outlook for the future, however, continued to be uncertain, given the increasing uncertainties of the overseas economy due to the policies of Europe and the United States and the rise of geopolitical risks.

In the housing industry, housing starts in the fiscal year ended March 31, 2018 decreased for the 9th consecutive month from the same month of the previous year since July 2017, and on a cumulative basis decreased from the previous fiscal year by 2.8% to 946,000. (*)

In the field of rental housing on which the Daito Group is focused, housing starts of rental residential properties in the fiscal year ended March 31, 2018 decreased for the 10th consecutive month from the same month of the previous year since June 2017, and on a cumulative basis decreased from the previous fiscal year by 4.0% to 410,000. (*) Going forward, the rental housing market is likely to change from the temporary upturn to steady growth for optimization.

Meanwhile, demand for rental houses with high convenience, safety and comfort will continue to be steady. Companies offering rental houses are expected to acquire expertise about the management of sound rental buildings in accordance with tenants’ demands and provide environmentally-friendly rental houses such as ZEH (Net-Zero Energy House) in response to the diversifying needs of tenants.

Under such circumstances, the Daito Group has positioned the Company, Daito Kentaku Partners Co., Ltd. and Daito Kentaku Leasing Co., Ltd. as the three core companies of the Group, and operates businesses under a new Group framework, starting from May 2017. Centering on these three core companies, the Daito Group intends to divide operations and increase their efficiency, as well as enhance the specialization of each business area to offer the greatest satisfaction to customers, with the aim to become a corporate group that is truly trusted by customers and other stakeholders.

* Source: Policy Bureau of Ministry of Land, Infrastructure, Transport and Tourism, “Data of the Current Survey on Construction Statistics”

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(ii) Overview of Daito Group

During the fiscal year ended March 31, 2018, the Daito Group posted increased sales and profits on a consolidated basis for the tenth consecutive year, having recorded net sales in the amount of 1,557,017 million yen (up 4.0% year-on-year), and posted an operating income of 126,369 million yen (up 5.2% year-on-year), ordinary income of 131,533 million yen (up 5.6% year-on-year), and current term profit attributable to owners of the parent of 87,829 million yen (up 6.9% year-on-year). These sales and income amounts are all historic highs for the Daito Group.

(iii) Progress and Results by Segment

■ Construction Business

In the construction business, net sales of completed construction contracts increased 0.6% year-on-year to 627,631 million yen, as a result of the successful development of the ample number of orders in hand. The gross profit margin for completed projects dropped 0.2 points from the previous fiscal year to 31.5% due to the rise of labor costs with the effects of construction work related to the Tokyo Olympic and Paralympic Games and the tight supply in the labor market, among others.

Orders received decreased 0.6% year-on-year to 651,077 million yen and construction orders in hand as of March 31, 2018 decreased 0.1% year-on-year to 895,343 million yen.

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■ Real Estate Business

In the real estate business, an increase in whole-building lease agreements under our Lease Management Trust System allowed our leasing company, Daito Kentaku Partners Co., Ltd. to increase its rental income, while House Leave Co., Ltd., which offers joint guarantor-free services, increased its revenues, resulting in a 5.7% rise in net sales of the real estate business year-on-year to 871,388 million yen.

In terms of tenant recruiting activities, we attracted the attention of customers looking for apartments and raised the Company’s profile by airing new TV commercials of the lease brokerage brand, “e-Heya Net” and by focusing on our annual promotions. As a result of such efforts, the number of tenancy agreements concluded of the three core companies of the Group (*), rose 5.2% year-on-year to 296,018. Consequently, the occupancy rate of our leased residential properties as of March 31, 2018 increased 0.3 points year-on-year to 97.2%, while the occupancy rate of our leased commercial properties rose 0.1 points year-on-year to 98.4%.

(※) Three core companies: the Company, Daito Kentaku Partners Co., Ltd. and Daito Kentaku Leasing Co., Ltd.

■ Other Business (Financial Business and Other Business)

Total of net sales of other business increased 19.5% year-on-year to 57,997 million yen. This was attributable to, among others, the increase in sales in other business stemming from the increase in the number of properties supplied with LP gas from the Gaspal Group, starting with Gaspal Co., Ltd., the increase in the number of customers using daytime care service facilities targeted at the elderly provided by Care Partner Co., Ltd. and the increase in the number of policy holders of HOUSEGUARD SSI, a small-amount, short-term insurance provider offering coverage of rent and household effects for tenants of leased building.

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Segment

(Reference) 43rd Fiscal Term

Sales (million yen)

44th Fiscal Term Sales

(million yen)

Year-on-year Change (%)

Construction business

Residential 618,217 620,307 0.3 Commercial 2,656 3,597 35.4

Other 3,036 3,725 22.7 Total 623,910 627,631 0.6

Real estate business

Whole-building lease agreements

755,002 798,799 5.8

Improvement/repair work 26,014 24,567 (5.6)

Real estate brokerage 17,652 16,964 (3.9)

Rent guarantee business 9,702 10,954 12.9 Power generation

business 6,119 7,311 19.5

Lease business 6,266 6,071 (3.1) Other 3,884 6,719 73.0 Total 824,642 871,388 5.7

Financial business Total 6,695 7,309 9.2

Other business Total 41,856 50,688 21.1

Sum total 1,497,104 1,557,017 4.0

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(2) Business Strategies

The rental housing market is shifting from the temporary upturn owing to the inheritance tax reform in January, 2015 to steady growth for optimization. The need for effective land utilization remains high among aging landowners, stemming from their requirements for asset succession and tax saving measures, and is expected to remain steady. Consequently, the Daito Group will need to reinforce its one-stop services for asset succession, in order for landowners to realize “amicable and smooth asset succession to the next generation.”

Meanwhile, given the increasing number of single-person households as a result of the declining birthrate and aging population coupled with the increasing tendency to marry late, together with the change in attitudes toward homes reflecting the diversification of lifestyles. The tenants are thus expressing increasingly diverse needs, as they become more discerning in their choice of housing. The Daito Group will be required to improve and expand services that will provide safety, comfort and enrichment to the tenants’ lives, as well as offer them attractive buildings and residences.

Although the tight supply of construction workers, which was seen after the occurrence of the Great East Japan Earthquake, has become more stable, supply and demand for construction workers remain uncertain because of the increase in construction work related to the Tokyo Olympics and Paralympic Games and the decrease in the number of construction workers. The Daito Group will need to keep its focus on securing appropriate completed construction profits and ensuring the strengthening and quality of construction structures.

In such a market environment, the Daito Group has developed a 5-year medium-term business plan, which will conclude in the fiscal year ending March 31, 2021. We revised this plan to reflect the business results of the fiscal year ended March 31, 2018.

Outline of the medium-term business plan and measures for the achievement of the plan by segment are as follows:

(i) Outline of the medium-term business plan

Under the new brand message, “Life is Built on Trust” we have designated “the nursing care and childcare business,” “the energy business” and “the overseas business” as the “new core businesses” and intend to expand the Daito Group’s business domains, in addition to the construction business and the real estate business, which are our core businesses, focusing on the Lease Management Trust System, with the aim to become a company entrusted by its customers in various ways.

The Daito Group aims to achieve net sales of 1,791.0 billion yen, operating income of 138.0 billion yen, net income (*1) of 97.0 billion yen, and ROE (return on equity) of 30.0% and secure a 17.5% plus share in rental housing construction starts (assuming that the size of the rental housing market will be 390,000 units) in the fiscal year ending March 31, 2021 as medium-term business targets.

(※1) Profit attributable to owners of the parent

(※2) Includes the acquisition and disposal of treasury shares

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(ii) Segment strategies

■Construction Business

In the construction business, we will reinforce the sales force up to 3,500 sales staff (3,313 as of the end of the fiscal year ended March 31, 2018), and allocate management resources including the opening of stores by taking into account the market’s potential for growth based on the market scale and long-term demand for rental housing that reflect market research using a nationwide segmentation into approximately 4,600 marketing areas. In addition, we will focus our efforts on consulting sales on an ongoing basis from the perspective of “effective asset utilization/asset succession,” while strengthening product appeal to satisfy the needs of the Tokyo metropolitan area and other large cities, as well as tenants and female customers.

In anticipation of a future increase in domestic construction demand due to the Tokyo Olympics and Paralympic Games, among others, the Daito Group will strengthen the alliance with collaborating companies, in order to restrain construction cost, secure labor force, and enhance construction capability.

By implementing the measures mentioned above, the Daito Group aims to achieve orders received of 701.0 billion yen, net sales of completed construction contracts of 703.0 billion yen, and gross profit margin for completed projects of 30.4% for the fiscal year ending March 31, 2021.

■Real Estate Business

In the real estate business, we will provide services in line with the diversifying needs of tenants, including the increasing population of senior citizens, foreign customers and those who wish to live with their pets.

We will also continue to promote initiatives to gain more widespread recognition of and expand our fan base of the lease brokerage brand, “e-Heya Net,” by sponsoring the LPGA tour “Daito Kentaku e-Heya Net Ladies” (with official permission by the Ladies Professional Golfers’ Association of Japan) and continuously carrying out sales promotion campaigns, among others.

By implementing the measures mentioned above, the Daito Group aims to achieve net sales on real estate business of 1,022.7 billion yen, the number of tenancy agreements concluded of 323,000, and the occupancy rate of leased residential units of 97.0% (March 2021) for the fiscal year ending March 31, 2021.

■Other Business (Financial Business and Other Business)

In other businesses, we will expand businesses that are expected to have high synergistic effects with our core businesses, by such means as expanding the insurance business intended for landowners and tenants through HOUSEGUARD SSI, in addition to increasing the number of homes supplied by LP gas by the Gaspal Group, starting with Gaspal Co., Ltd., and expand daycare service centers and the childcare business of Care Partner Co., Ltd.

By implementing the measures mentioned above, the Daito Group aims to achieve net sales of 65.3 billion yen in the other business for the fiscal year ending March 31, 2021.

We look forward to the continued support and guidance of all our shareholders.

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〔Reference〕 Basic Capital Policy of the Company As its key performance indicators, the Company aims for an operating income margin of 7% or higher and a return on equity (ROE) of 30% and seeks the optimal balance between financial soundness, capital efficiency and shareholder returns. In addition, the Company has disclosed in its shareholder return policy that it targets a payout ratio of 50% of its consolidated net income (Profit attributable to owners of the parent), and unless there is major demand for funds, that it intends to spend 30% of its consolidated net income for the purchase and retirement of treasury stock to bring the total return ratio to 80%.

Key performance indicators

Targeted operating income

margin: 7% or higher

Targeted return on equity (ROE):

30%

44th Fiscal Term (Year ended March 31, 2018)

8.1%


30.5%

Shareholder return policy

Total return ratio (Dividends + Purchase/retirement of treasury

stock): 80%

Payout ratio: 50%

Purchase / retirement of treasury

stock: 30%


80%

44th Fiscal Term (Year ended

March 31, 2018) Payout ratio: 50%

Purchase / retirement of treasury stock: 30%

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(3) Capital Investment, etc. In the fiscal year ended March 31, 2018, total capital investment amounted to 18,535 million yen, which primarily consisted of the installation of photovoltaic power generation facilities by Daito Kentaku Partners Co., Ltd. and the development of the backbone system in the Company.

(4) Financing In the fiscal year ended March 31, 2018, the Company raised a total of 90 billion yen as long-term loans payable from 22 partner financial institutions. The funds were allocated to working capital and investment in the expansion of future business domains, among others.

(5) Trends in Assets and Income

(i) Trends in Assets and Income of Enterprise Group

Category 41st fiscal term:

Fiscal year ended March 31, 2015

42nd fiscal term: Fiscal year ended March

31, 2016

43rd fiscal term: Fiscal year ended March

31, 2017

44th fiscal term: Fiscal year ended March 31, 2018 (under review)

Net sales (million yen)

1,353,155 1,411,643 1,497,104 1,557,017

Operating income (million yen)

91,520 101,001 120,162 126,369

Ordinary income (million yen)

95,887 105,558 124,509 131,533

Profit attributable to owners of the parent (million yen)

56,109 67,279 82,168 87,829

Earnings per share ＜EPS＞(yen)

710.19 863.11 1,072.64 1,165.29

Total assets (million yen)

701,119 728,548 781,431 842,978

Net assets (million yen)

236,794 248,522 275,485 297,039

Note: From the fiscal year ended March 31, 2016, the Company has applied the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21 of September 13, 2013), and accordingly “Net income” has been changed to “Profit attributable to owners of the parent.”

(ii) Trends in Assets and Income of the Company

Category 41st fiscal term:

Fiscal year ended March 31, 2015

42nd fiscal term: Fiscal year ended March

31, 2016

43rd fiscal term: Fiscal year ended March

31, 2017

44th fiscal term: Fiscal year ended March 31, 2018 (under review)

Net sales (million yen)

608,973 617,377 646,878 634,848

Operating income (million yen) 50,146 53,481 68,568 64,398

Ordinary income (million yen)

58,990 80,646 85,422 92,553

Net income (million yen)

34,471 59,811 59,926 69,020

Earnings per share ＜EPS＞(yen) 436.32 767.30 782.29 915.73

Total assets (million yen)

479,698 500,357 535,839 577,128

Net assets (million yen)

124,448 130,992 136,759 146,945

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2. The Company’s Stock

(1) Number of shares authorized 329,541,100 shares

(2) Number of shares issued 75,306,006 shares (excluding treasury stock: 322,873 shares)

(Note) Pursuant to the provisions of Article 178 of the Companies Act, the Company retired 1,240,700 treasury stocks effective March 30, 2018.

As a result, the number of shares issued including treasury stock decreased by 1,240,700 from the end of the previous fiscal year (March 31, 2017).

(3) Number of shareholders 16,043 shareholders

(4) Principal shareholders

Name of shareholder Number of shares

owned (thousand shares)

Shareholding ratio (%)

JP Morgan Chase Bank 380055 3,953 5.25

The Master Trust Bank of Japan, Ltd. (Trust account) 3,805 5.05

Japan Trustee Services Bank, Ltd. (Trust account) 3,313 4.40

State Street Bank West Client – Treaty 505234 1,621 2.15

Sumitomo Realty & Development Co., Ltd. 1,606 2.13

Japan Trustee Services Bank, Ltd. (Trust account 5) 1,550 2.05

Co-op Suppliers’ Stock Holding 1,505 1.99

SMBC Trust Bank Ltd. (Sumitomo Mitsui Banking Corporation Retirement Benefit Trust Account)

1,474 1.95

ORBIS SICAV 1,374 1.82

BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC) 1,256 1.66

(Notes) 1. Shareholding ratio is calculated after deducting treasury stock (322,000 shares). 2. The Company holds 322,000 shares of treasury stock, excluding 393,000 shares held by the ESOP Trust and

403,000 shares held by the J-ESOP.

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3. Corporate Officers

(1) Names, etc., of Directors and Audit & Supervisory Board Members

Position Name Responsibilities and Significant Concurrent Positions Held

President and Representative Director

(CEO)

Naomi Kumakiri

Managing Director Katsuma

Kobayashi General Manager of Construction Business Headquarters

Managing Director Shuji Kawai

General Manager of Corporate Management Headquarters, General Manager of Subsidiary Business Headquarters, In charge of Legal Service Division, Total Quality Control Division and Corporate Planning Division

Director Kanitsu Uchida

General Manager of Subsidiary Business Headquarters in charge of Nursing Care and Childcare Business and Overseas Business

Director Kei

Takeuchi General Manager of Real Estate Business Headquarters

Director Kazuhiko

Saito General Manager of East Japan Construction Business Headquarters, Officer in charge of Post-Disaster Restoration Business

Director Takeshi

Nakagawa General Manager of Subsidiary Business Headquarters in charge of Energy Business, Representative Director and President of Gaspal Co., Ltd.

Director Koji Sato Representative Director and President of Daito Kentaku Partners Co., Ltd.

Director (Outside) Toshiaki

Yamaguchi

Chairman of Governance Committee Representative Attorney, Yamaguchi Toshiaki Law Firm Director, Japan Internal Control Association Director, Association of Certified Fraud Examiners Leader of Outside Director Guidelines Study Team, Judicial System Research Board, Japan Federation of Bar Associations Director of Japan Corporate Governance Network Outside Audit & Supervisory Board Member of Osaka University Venture Capital Co., Ltd. Audit & Supervisory Board Member of Osaka Municipal Transportation Bureau (currently, Osaka Metro Co., Ltd.)

Director (Outside) Mami Sasaki Committee Member of Governance Committee

Director (Outside) Takashi Shoda Committee Member of Governance Committee Consultant of DAIICHI SANKYO COMPANY, LIMITED Outside Director, Ube Industries, Ltd.

Standing Audit &

Supervisory Board Member (Outside)

Masayasu Uno Committee Member of Governance Committee

Audit & Supervisory Board Member (Outside)

Hideo Hachiya

Committee Member of Governance Committee Representative Attorney, Hachiya Law Firm


Kazumitsu Futami

Committee Member of Governance Committee Representative Director and President of Jei Kei Kikaku Co., Ltd.


Kazuo Fujimaki

Committee Member of Governance Committee Representative, Fujimaki Sogo Consulting

(Notes) 1. Mr. Koji Sato and Mr. Takashi Shoda were newly appointed as Directors and assumed office as resolved at the 43rd Ordinary General Meeting of Shareholders held on June 28, 2017.

2. Mr. Hitoshi Kadouchi, Mr. Yukio Daimon, Mr. Shinichi Marukawa, and Mr. Yujiro Sasamoto retired from the office of Director due to the expiry of their terms at the close of the 43rd Ordinary General Meeting of Shareholders held on June 28, 2017.

3. Mr. Toshiaki Yamaguchi, Ms. Mami Sasaki and Mr. Takashi Shoda are Outside Directors. 4. All Audit & Supervisory Board Members of the Company are Outside Audit & Supervisory Board

Members. 5. Audit & Supervisory Board Member Mr. Masayasu Uno is qualified as a Certified Public Accountant and

has considerable financial and accounting knowledge. 6. Audit & Supervisory Board Member Mr. Kazuo Fujimaki is qualified as a U.S. Certified Public Accountant

and has considerable international financial and accounting knowledge. 7. The Company has designated Directors Mr. Toshiaki Yamaguchi, Ms. Mami Sasaki and Mr. Takashi Shoda,

and Audit & Supervisory Board Members Mr. Masayasu Uno, Mr. Hideo Hachiya, Mr. Kazumitsu Futami and Mr. Kazuo Fujimaki as independent officers under the provisions set forth by the Tokyo Stock

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Exchange and the Nagoya Stock Exchange and has notified said Exchanges accordingly. 8. The names, responsibilities and significant concurrent positions held by Directors and Audit & Supervisory

Board Member as of April 1, 2018 are as follows.

Position Name Responsibilities and Significant Concurrent Positions Held

Senior Managing Director Katsuma Kobayashi General Manager of Construction Business Headquarters

Managing Director Shuji Kawai

General Manager of Corporate Management Headquarters and Subsidiary Business Headquarters in charge of Legal Division, Total Quality Control Division, Corporate Planning Division and Public Relations Department

Managing Director Kei Takeuchi General Manager of Real Estate Business Headquarters

(Reference) Names and responsibilities of Executive Officers as of April 1, 2018 are as follows.

Position Name Responsibilities

Senior Executive Officer Shuichi Ogawa General Manager of West Japan Construction Business Headquarters

Senior Executive Officer Takashi Suzuki General Manager of Central Japan Construction Business Headquarters

Executive Officer Fumiaki

Nakagami General Manager of Construction Management Department

Executive Officer Shoji Yamada General Manger of Chu-Shikoku Construction Business Department

Executive Officer Masayoshi

Tanaka Representative Director & President of Daito Finance Co., Ltd.

Executive Officer Hiromichi Ono Representative Director & President of Daito Mirai Trust Co., Ltd.

Executive Officer Kazunori Fukuda Representative Director & President of Daito Corporate Service Co., Ltd.

Executive Officer Yoshihiro Mori Representative Director and President, Daito Kentaku Leasing Co., Ltd.

Executive Officer Eiji Kawahara Senior Managing Director, Daito Kentaku Partners Co., Ltd.

Executive Officer Masafumi Tate General Manager of Design Management Department

Executive Officer Masayuki

Koishikawa General Manager of North Metropolitan Area Construction Business Department

Executive Officer Kouichi

Nakamura General Manager of Technological Development Department in charge of Central Japan Region

Executive Officer Satoshi Miyake General Manager of Keihanshin Area Construction Business Department

Executive Officer Jun Matsufuji General Manager of East Kanto Area Construction Business Department

18

(2) Outline of Limited Liability Agreements The Company has entered into a Limited Liability Agreement with all three (3) Outside Directors and all four (4) Outside Audit & Supervisory Board Members, the outline of which is as described below:

A. Limited Liability Agreements with Outside Directors

・In the event that the Company bears liability for damages caused by neglect of the Outside Director’s duty, the liability amount shall be the minimum amount set forth in Article 425, Paragraph 1 of the Companies Act.

・The limited liability stated above shall be applicable only when the Outside Director performs his duty in good faith and without material negligence.

B. Limited Liability Agreements with Outside Audit & Supervisory Board Members

・In the event that the Company bears liability for damages caused by neglect of the Outside Audit & Supervisory Board Member’s duty, the liability amount shall be the minimum amount set forth in Article 425, Paragraph 1 of the Companies Act.

・The limited liability stated above shall be applicable only when the Outside Audit & Supervisory Board Member performs his duty in good faith and without material negligence.

19

(3) Amount of Remuneration, etc., of Directors and Audit & Supervisory Board Members

Category Number of persons paid Amount paid

Director 15 persons 1,365 million yen

Audit & Supervisory Board Member 4 persons 99 million yen

Total (Outside Directors/Audit & Supervisory Board Members)

19 persons (8 persons)

1,465 million yen (135 million yen)

(Notes) 1. The amount paid to Directors indicated in the above table does not include the employee salary portion of

Directors concurrently serving as employees. 2. The amount paid to Directors indicated in the above table includes an expense of 307 million yen recognized

for the fiscal year ended March 31, 2017 in relation to the subscription rights to shares granted as stock options.

3. The amount paid to Directors indicated in the above table includes those paid to four (4) Directors who retired from the office of Director at the close of the 43rd Ordinary General Meeting of Shareholders held on June 28, 2017. As of March 31, 2018, the numbers of Directors and Audit & Supervisory Board Members are eleven (11) and four (4), respectively.

4. Directors’ remuneration is the sum of the fixed portion which is capped at 1 billion yen per year (including the Outside Directors’ remuneration capped at 50 million yen) and the variable portion which is capped at 1.5% of consolidated net income (Profit attributable to owners of the parent) for the fiscal year under review (not exceeding 1 billion yen, and not payable if consolidated net income [Profit attributable to owners of the parent] for the fiscal year under review falls short of 20 billion yen), not including the employee salary portion of Directors concurrently serving as an employee, as resolved at the 33rd Ordinary General Meeting of Shareholders of the Company held on June 27, 2007.

In addition to the aforementioned amount of remuneration, etc., the amount of remuneration related to stock options as stock-linked compensation for Directors (excluding Outside Directors) is capped at 530 million yen per year, as resolved at the 37th Ordinary General Meeting of Shareholders of the Company held on June 28, 2011.

5. Audit & Supervisory Board Members’ remuneration is capped at 100 million yen per year as resolved at the 33rd Ordinary General Meeting of Shareholders of the Company held on June 27, 2007.

6. In addition to the above, the Company paid retirement benefits of 3 million yen in total to one (1) Director subject to the resolution passed at the 37th Ordinary General Meeting of Shareholders held on June 28, 2011 concerning the payment of retirement benefits for termination resulting from the abolition of the retirement benefits system.

7. In addition to the above, the Company intends to pay retirement benefits of 22 million yen in total to one (1) Director pursuant to the resolution passed at the 37th Ordinary General Meeting of Shareholders held on June 28, 2011 concerning the payment of retirement benefits for termination resulting from the abolition of the retirement benefits system.

20

(4) Policy for the determination of remuneration of Directors and Audit & Supervisory Board Members

(i) Details and determination method of remuneration of Directors

a. Details of remuneration of Directors

Remuneration of Directors comprises basic remuneration as fixed remuneration, and bonuses and stock options as stock-linked compensation which form the performance-linked remunerations. Both types of remunerations shall not be more than an amount, which has been approved by the General Meeting of Shareholders.

Basic remuneration (fixed remuneration)

The basic remuneration of each Director shall be determined in consideration of quantitative factors such as corporate earnings, remuneration paid by other related companies, rate of increase in employees’ salary, and years of employment as well as qualitative factors such as management capability, achievement, and contribution of each Director.

The total basic remuneration shall be no more than 1.0 billion yen per year (including the Outside Directors’ remuneration which shall be no more than 50 million yen per year).

Bonuses (performance-linked remunerations)

Bonuses shall be determined in consideration of the achievement, contribution, etc., of each Director during the fiscal year and be paid from the total amount of bonuses which is determined by multiplying consolidated net income (Profit attributable to owners of the parent) for the fiscal year under review by a certain ratio determined by the Board of Directors (1.5%). However, Outside Directors are not entitled to receive any bonuses.

Bonuses shall not exceed 1.0 billion yen, and not payable if consolidated net income (Profit attributable to owners of the parent) for the fiscal year under review falls short of 20.0 billion yen.

Stock options as stock-linked compensation

The Company has introduced stock options as stock-linked compensation for Directors (excluding Outside Directors) since 2011 for the purpose of raising their willingness to contribute to the medium- to long-term improvement in the financial performance and enhancement of the enterprise value of the Company by clarifying the linkage between the financial performance and the value of shares of the Company and sharing a common value with shareholders. There are two types of stock options as stock-linked compensation, namely, A Plan, which aims to improve performance of the Company during the term of office of Director, and B Plan which aims to improve the medium-term performance of the Company. In terms of the B Plan, separate performance achievement criteria have been established.

The amount of remuneration related to stock options as stock-linked compensation granted to each Director shall be no more than 530 million yen per year, and the individual amounts shall be determined in consideration of the achievement and contribution of each Director during the fiscal year under review.

b. Determination method

The total amount of Directors’ remuneration shall be no more than the aggregate amount of Directors’ remuneration approved by the General Meeting of Shareholders and specific amounts of remuneration for each Director shall be determined by allocating the aggregate amount pursuant to the resolution of the Board of Directors.

In addition, the Company conducts mutual evaluations each year of the business execution and management supervision of its Directors mainly through the Governance Committee, which comprises the Representative Directors, all Outside Directors and all Audit & Supervisory Board Members. The results of these evaluations are reflected in the management structure for the following fiscal year and the basic remuneration, bonuses and stock options as stock-linked compensation of the Directors (excluding Outside Directors).

21

(ii) Details and determination method of remuneration of Audit & Supervisory Board Members

a. Details of remuneration of Audit & Supervisory Board Members

The total amount of Audit & Supervisory Board Members’ remuneration shall be no more than 100 million yen, which was approved by the General Meeting of Shareholders.

b. Determination method

The total amount of remuneration of Audit & Supervisory Board Members shall be no more than the aggregate amount of remuneration of Audit & Supervisory Board Members approved by the General Meeting of Shareholders and specific amounts of remuneration of each Audit & Supervisory Board Member shall be determined by allocating the aggregate amount pursuant to the deliberation by the Audit & Supervisory Board Members.

22

(5) Outside Officers

(i) Important concurrent positions and relationship with the Company

a. Outside Directors

Name Parties with which important concurrent

positions are held and details of positions held concurrently

Relationship between such parties and the Company

Toshiaki Yamaguchi

Representative Attorney, Yamaguchi Toshiaki Law Firm

There is no business transactional relationship between these parties and the Company.

Director, Japan Internal Control Association

Director, Association of Certified Fraud Examiners

Leader of Outside Director Guidelines Study Team, Judicial System Research Board, Japan Federation of Bar Associations

Director of Japan Corporate Governance Network

Outside Audit & Supervisory Board Member of Osaka University Venture Capital Co., Ltd.

Audit & Supervisory Board Member of Osaka Municipal Transportation Bureau (currently, Osaka Metro Co., Ltd.)

Mami Sasaki Not applicable -

Takashi Shoda

Consultant of DAIICHI SANKYO COMPANY, LIMITED There is no business transactional

relationship between these parties and the Company. Outside Director, Ube Industries, Ltd.

b. Outside Audit & Supervisory Board Members

Name Parties with which important concurrent

positions are held and details of positions held concurrently

Relationship between such parties and the Company

Masayasu Uno Not applicable. -

Hideo Hachiya Representative Attorney, Hachiya Law Firm There is no business transactional relationship between this party and the Company.

Kazumitsu Futami Representative Director and President of Jei Kei Kikaku Co., Ltd.

There is no business transactional relationship between this party and the Company.

Kazuo Fujimaki Representative, Fujimaki Sogo Consulting There is no business transactional relationship between this party and the Company.

(Note) In July 2011, Audit & Supervisory Board Member, Mr. Hideo Hachiya entered into a construction work contract with the Company for the contract amount of 23 million yen, and the construction work was completed in January 2012 and delivery of the construction was completed. The contract amount was determined based on conditions identical to that of other customers.

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(ii) Main activities during the fiscal year under review

a. Outside Directors

Name Attendance at Board of

Directors meetings (Attendance ratio)

Main activities

Toshiaki Yamaguchi 12 times out of

13 meetings (92.3%)

In the Board of Directors meetings, he expressed his opinions by making the most of his strong expertise and extensive experience as a lawyer with thorough knowledge of corporate legal affairs, risk management and corporate governance. In addition, as a Chairman of the Governance Committee, he compiled the evaluation results of the mutual evaluations of executive Directors and conducted individual interviews, playing a central role in the mutual evaluations, as well as commented, as necessary, on the next medium-term business plan formulated by the Representative Directors.

Mami Sasaki 13 times out of

13 meetings (100.0%)

In the Board of Directors meetings, she expressed her opinions by making the most of her extensive knowledge and experience of organizational management in the global financial business. In addition, as a Committee Member of the Governance Committee, she confirmed the evaluation results of the mutual evaluations of executive Directors and the individual interview results as well as commented, as necessary, on the next medium-term business plan formulated by the Representative Directors.

Takashi Shoda 10 times out of


In the Board of Directors meetings, he expressed his opinions by making the most of his extensive experience and knowledge acquired in the course of long-term involvement as a corporate manager in companies that operate global business, and his considerable insights on CSR activities acquired in the course of active engagement as a corporate manager. In addition, as a Committee Member of the Governance Committee, he confirmed the evaluation results of the mutual evaluations of executive Directors and the individual interview results, as well as commented, as necessary, on the next medium-term business plan formulated by the Representative Directors.

Note: The rate of attendance for Director Takashi Shoda is based on all Board meetings held after he assumed office as Director on June 28, 2017.

24

b. Outside Audit & Supervisory Board Members

Name

Attendance at Board of Directors meetings

(Attendance ratio)

Attendance at Audit &

Supervisory Board

meetings (Attendance

ratio)

Main activities

Masayasu Uno

13 times out of

13 meetings

(100.0%)

13 times out of

13 meetings

(100.0%)

In the Board of Directors meetings, he expressed his opinions on business execution by making the most of his strong specialized knowledge of financial and accounting as a certified public accountant and his extensive experience and insight as a business entrepreneur.

In the Audit & Supervisory Board meetings, he reported the progress of execution of audits based on the audit plan and exchanged opinions on audit policies, etc.

In addition, he attended important meetings on business execution and compliance promotion meetings and conducted audits targeted at major business establishments, etc.

In addition, as a Committee Member of the Governance Committee, he confirmed the evaluation results of the mutual evaluations of executive Directors and the individual interview results as well as commented, as necessary, on the next medium-term business plan formulated by the Representative Directors.

Hideo Hachiya

13 times out of

13 meetings

(100.0%)

13 times out of

13 meetings

(100.0%)

In the Board of Directors meetings, he expressed his opinions on business execution by making the most of his strong expertise and extensive experience as a lawyer.

In the Audit & Supervisory Board meetings, he received reports on the progress of audits and exchanged opinions on audit policies, etc.


Kazumitsu Futami

13 times out of

13 meetings

(100.0%)

13 times out of

13 meetings

(100.0%)

In the Board of Directors meetings, he expressed his opinions on business execution by making the most of his extensive experience and insight of housing administration and loan guarantee business for construction loans for rental residential property development.

In the Audit & Supervisory Board meetings, he received reports on the progress of audits and exchanged opinions on audit policies, etc.


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Name

Attendance at Board of Directors meetings

(Attendance ratio)

Attendance at Audit &

Supervisory Board

meetings (Attendance

ratio)

Main activities

Kazuo Fujimaki

13 times out of


13 times out of


In the Board of Directors meetings, he expressed his opinions on business execution by making the most of his experience in serving as an Outside Audit & Supervisory Board Member at a listed company, specialized knowledge as a U.S. certified public accountant, and his extensive experience and insight gained through his involvement in management as a consultant.

In the Audit & Supervisory Board meetings, he received reports on the progress of audits and exchanged opinions on audit policies.


(iii) Family Relationships of Outside Directors and Outside Audit & Supervisory Board Members

None of the Outside Directors or Outside Audit & Supervisory Board Members is an executive person of a subsidiary, associate or major business partner of the Company, or a spouse, any family within the third degree of kinship of a Director or Audit & Supervisory Board Member of the Company or a similar person.

26

[Reference] Guidelines for Selecting Outside Officers (Directors and Audit & Supervisory Board Members) Outside Officers and Candidates as Outside Officers of the Company shall be selected from those who satisfy the following guidelines established by the Company.

1. Can directly supervise the discussions and decisions by the Board of Directors on, among others, management, corporate legal affairs, and governance issues;

2. Can reflect their own knowledge and insights in the development of a growth strategy, the establishment of a management strategy, the achievement of a mid-term business plan, etc.; and

3. Can provide advice and guidance on other corporate management issues based on their own knowledge, expertise and experience.

[Reference] Independence Criteria for Outside Officers (Directors and Audit & Supervisory Board Members) Outside Officers and Candidates as Outside Officers of the Company shall be selected from those who satisfy the following independence criteria established by the Company. The following 1. applies to the present and for an indefinite past period and 2. through 5. apply to the present and for the period of past 10 years.

1. Persons related to the Daito Group Not a director (excluding outside directors), audit & supervisory board member (excluding outside audit & supervisory board member), accounting advisor, executive officer, or employee (hereinafter “director, etc.”) of any subsidiary (Note 1) or affiliate (Note 2) of the Company (hereinafter the “the Daito Group”).

2. Persons with voting rights (1) Not a shareholder holding 10% or more of the voting rights in the Company or a director,

etc., of such a shareholder; and (2) Not a director, etc., of a company in which the Daito Group holds 10% or more of the

voting rights. 3. Persons with a trade relationship

(1) Not a director, etc., of a company with which the Daito Group has carried out transactions in the total amount that is equivalent to 2% or more of the consolidated net sales of either party;

(2) Not a director, etc., of a financial institution that is a major lender (with a lending balance equivalent to 2% or more of the consolidated total assets of the Company) to the Daito Group; and

(3) Not a director, etc., of a lead underwriter of the Daito Group. 4. Providers of expert services (lawyers, certified public accountants, consultants, etc.)

(1) Not a certified public accountant who is an accounting auditor of the Daito Group, or partner or employee of an audit firm; and

(2) Not a person who receives a total annual fee of 10 million yen or more from the Daito Group as a lawyer, certified public accountant, tax accountant or any other consultant in addition to the remuneration he/she receives from the Daito Group as a Director or Audit & Supervisory Board Member.

5. Others (1) Not a relative within the second degree of kinship of any of the persons listed in 1 through

4 above (excluding those who are not significant); (2) Not a director, etc., of a company with which the Daito Group has a relationship in which

officers are exchanged between the parties; and (3) Not a director, etc., of a company with which the Daito Group has a cross-holding of

shares.

27

(Notes)1. A “subsidiary” is a subsidiary prescribed in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation of Financial Statements, etc.

2. An “affiliate” is an affiliate prescribed in Article 8, Paragraph 5 of the Ordinance on Terminology, Forms and Preparation of Financial Statements, etc.

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Consolidated Balance Sheet

(Millions of yen) Assets Liabilities

Account item

(Reference) 43rd

Fiscal Term

(As of March 31, 2017)

44th

Fiscal Term


Account item

(Reference) 43rd

Fiscal Term (As of March

31, 2017)

44th Fiscal Term (As of March

31, 2018)

Current assets: 509,778 530,182 Current liabilities: 337,990 296,238

Cash and deposits 248,180 246,714 Accounts payable for construction contracts 43,677 42,739

Money held in trust 22,000 19,000 Current portion of long-term loans payable 44,074 30,589

Accounts receivable from completed construction contracts and other

38,297 51,908 Lease obligations 201 200

Short-term investment securities 18,509 22,885 Income taxes payable 30,751 28,460

Costs on uncompleted construction contracts 14,841 14,846

Advances received on uncompleted construction contracts

57,019 49,519

Other inventories 5,803 5,919 Advances received 75,543 60,340

Prepaid expenses 63,020 65,144 Provision for bonuses 21,523 23,179

Deferred tax assets 19,696 20,338 Provision for warranties for completed construction 1,091 1,121

Operating loans 62,736 64,262 Deposits received 7,595 7,577

Other 16,932 19,387 Other 56,511 52,510

Allowance for doubtful accounts (241) (224) Noncurrent liabilities: 167,955 249,700

Noncurrent assets: 271,653 312,795 Long-term loans payable 10,368 75,016

Property, plant and equipment 126,014 147,884 Lease liabilities 786 802

Buildings and structures 37,236 49,882 Deferred tax liabilities 94 464 Provision for repairs on whole building lease 97,405 115,503

Machinery and equipment 37,315 36,267 Net defined benefit liability 10,203 9,925

Tools, furniture and fixtures 2,127 2,210

Land 47,596 57,571 Long-term guarantee deposits 39,868 36,777

Lease assets 1,621 1,478 Other 9,228 11,212

Other 117 475 Total liabilities 505,945 545,939

Intangible assets 17,635 23,663 Net Assets

Investments and other assets 128,003 141,247 Shareholders’ equity: 281,243 299,507

Investment securities 38,367 47,869 Capital stock 29,060 29,060 Subordinated bonds and subordinated trust beneficiary rights

12,857 12,270 Capital surplus 34,540 34,540

Deferred tax assets 34,296 41,026 Retained earnings 232,978 253,108

Other 45,851 44,020 Treasury stock (15,337) (17,203)

Allowance for doubtful accounts (3,369) (3,939) Accumulated other comprehensive income (8,479) (5,479)

Valuation difference on available-for-sale securities 2,526 5,882

Deferred gains or losses on hedges (286) (294)

Revaluation reserve for land (7,584) (7,584)

Foreign currency translation adjustment (1,705) (2,219)

Remeasurements of defined benefit plans (1,429) (1,264)

Subscription rights to shares 398 415

Non-controlling interests 2,322 2,596

Total net assets 275,485 297,039

Total assets 781,431 842,978 Total liabilities and net assets 781,431 842,978

29

Consolidated Statement of Income

(Millions of yen)

Account item


(From April 1, 2016 to March 31, 2017)

44th Fiscal Term (From April 1, 2017 to March 31, 2018)

Net sales Net sales of completed construction contracts

623,910 627,631

Sales on real estate business 824,642 871,388 Other business revenue 48,551 1,497,104 57,997 1,557,017

Cost of sales Cost of sales of completed construction contracts

426,264 430,121

Cost of sales on real estate business 751,940 792,311 Cost of sales on other business 33,311 1,211,516 37,538 1,259,970

Gross profit Gross profit on completed construction contracts

197,645 197,510

Gross profit-real estate business 72,701 79,077 Gross profit-other business 15,240 285,588 20,458 297,046

Selling, general and administrative expenses 165,426 170,677 Operating income 120,162 126,369

Non-operating income Interest income 527 522 Dividends income 212 236 Commission fee 3,654 3,662 Miscellaneous income 1,406 5,800 1,617 6,039

Non-operating expenses Interest expenses 401 322 Provision of allowance for doubtful accounts

89 112

Share of loss of entities accounted for using equity method

336 80

Miscellaneous expenses 627 1,453 360 875 Ordinary income 124,509 131,533

Extraordinary income Gain on sales of noncurrent assets 3 45 Gain on sales of investment securities 28 31 43 88

Extraordinary loss Loss on sales and retirement of noncurrent assets

422 541

Impairment loss 122 545 136 677 Income before income taxes and non-controlling interests

123,995 130,944

Income taxes – current 49,511 51,525 Income taxes – deferred (8,054) 41,457 (8,820) 42,705

Net income 82,538 88,239 Profit attributable to non-controlling interests

369 410

Profit attributable to owners of the parent

82,168 87,829

30

Non-consolidated Balance Sheet

(Millions of yen) Assets Liabilities

Account item

(Reference) 43rd

Fiscal Term (As of March

31, 2017)

44th

Fiscal Term


Account item

(Reference) 43rd

Fiscal Term (As of March 31,

2017)

44th

Fiscal Term


Current assets: 362,561 367,288 Current liabilities: 374,249 342,762

Cash and deposits 213,182 195,698 Accounts payable for construction contracts 41,055 40,619

Accounts receivable from completed construction contracts 30,282 41,399 Current portion of long-term loans

payable 44,074 24,352

Short-term investment securities 18,464 22,880 Lease liabilities 27 34 Costs on uncompleted construction contracts 14,462 14,694 Accounts payable - other 26,488 27,296

Raw materials and supplies 5,314 5,221 Income taxes payable 17,238 12,929

Short-term loans receivable from subsidiaries and affiliates 62,390 63,920 Accrued consumption taxes 4,725 2,639

Prepaid expenses 1,321 893 Advances received on uncompleted construction contracts

56,888 49,296

Deferred tax assets 9,224 10,279 Advances received 242 287 Accounts receivable - other 2,678 4,562 Deposits received 164,347 164,654 Advances paid 3,925 4,538 Provision for bonuses 16,299 17,987

Other 1,549 3,421 Provision for warranties for completed construction 1,041 1,047

Allowance for doubtful accounts (234) (222) Other 1,819 1,617 Noncurrent assets: 173,278 209,839 Noncurrent liabilities: 24,831 87,419

Property, plant and equipment 64,078 9,470 Long-term loans payable 10,368 75,016 Buildings 16,900 2,019 Lease liabilities 3 112 Structures 537 51 Provision for retirement benefits 6,539 6,299 Machinery and equipment 396 297 Long-term guarantee deposits 3,456 87 Tools, furniture and fixtures 1,098 831 Other 4,463 5,903 Land 45,115 6,135 Total liabilities 399,080 430,182 Lease assets 29 135 Net Assets

Intangible assets 14,660 20,105 Shareholders’ equity: 141,727 141,183 Software 7,020 13,745 Capital stock 29,060 29,060 Software in progress 7,472 6,204 Capital surplus 34,540 34,540 Other 167 156 Legal capital surplus 34,540 34,540

Investments and other assets 94,539 180,262 Retained earnings 93,462 94,785 Investment securities 17,258 27,119 Legal retained earnings 7,265 7,265 Subordinated bonds and

subordinated trust beneficiary rights 12,857 12,270 Other retained earnings 86,197 87,519

Stocks of subsidiaries and affiliates 43,772 121,323 Retained earnings brought forward 86,197 87,519

Long-term loans receivable from subsidiaries and affiliates 1,657 3,107 Treasury stock 15,337) 17,203)

Deferred tax assets 3,371 2,353 Valuation and translation adjustments: 5,344) 5,378

Guarantee deposits 10,743 10,845 Valuation difference on available-for-sale securities 2,526 5,882

Other 6,779 5,696 Deferred gains or losses on hedges 286) 294) Allowance for doubtful accounts (1,899) (2,454) Revaluation reserve for land 7,584) 209) Subscription rights to shares 376 383 Total net assets 136,759 146,945 Total assets 535,839 577,128 Total liabilities and net assets 535,839 577,128

31

Non-consolidated Statement of Income

(Millions of yen)

Account item


(From April 1, 2016 to March 31, 2017)

44th Fiscal Term (From April 1, 2017 to March 31, 2018)

Net sales

Net sales of completed construction contracts

623,952 627,627

Sales on real estate business, etc. 22,926 646,878 7,220 634,848

Cost of sales

Cost of sales of completed construction contracts

427,102 434,170

Cost of sales on real estate business, etc.

19,225 446,328 4,247 438,417

Gross profit

Gross profit on completed construction contracts

196,849 193,457

Gross profit-real estate business, etc.

3,700 200,550 2,973 196,430

Selling, general and administrative expenses

131,981 132,032

Operating income 68,568 64,398

Non-operating income

Interest income 364 346

Interest on securities 316 300

Dividends income 13,405 23,385

Commission fee 3,299 3,322

Miscellaneous income 1,023 18,410 2,101 29,457

Non-operating expenses

Interest expenses 380 288

Provision of allowance for doubtful accounts

817 743

Loss on valuation of investment securities

2 0

Miscellaneous expenses 356 1,556 269 1,302

Ordinary income 85,422 92,553

Extraordinary income

Gain on sales of investment securities

28 28 43 43

Extraordinary loss

Loss on sales and retirement of noncurrent assets

139 139 117 117

Income before income taxes 85,311 92,480

Income taxes – current 25,711 24,977

Income taxes – deferred (326) 25,385 (1,517) 23,460

Net income 59,926 69,020

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